Wanted: Health Care Finance Reform

During a recent town hall-style meeting in Colorado to bolster support for his health care initiative, President Obama was asked why he had changed his rhetoric from using the term “health care reform” to the term “health insurance reform.” In my opinion, it was a smartly-asked question that required a more thoughtful answer than the president provided. For if I were to lay my cards out on the table, I would admit that for me it’s never been about health care reform but rather it’s about health care finance reform.

Whether we realize it or not, here in Minnesota and throughout the entire upper Midwest region we are blessed with the best health care delivery system in the nation. We are fortunate to have some of the most talented physicians, nurses and health care practitioners, working in state-of-the-art hospitals, clinics and health care facilities. A large percentage of our care is delivered through large multi-specialty clinics and integrated health care systems that lead the nation in quality; achieving efficiencies that other parts of the nation can only dream about. When we talk about our health care systems up here names like Mayo, Fairview, Allina, Avera, Sandford, Altru, Meritcare, Gunderson and Marshfield are all recognized for their quality, efficiency and effectiveness. Simply put, we don’t need to nor want to change our health care delivery system.

On the other hand, the way we finance and pay for all this great care is a total mess. This is just as true for our public payers as it is for our private payers. It’s too expensive, excludes more than 40 million Americans and is financially unsustainable. Here are some simply examples of the illogic of the current financing system:

· A physician working in a highly efficient, multi-specialty clinic in Minnesota who sees a patient for a routine office visit; or a hospital in North Dakota that admits and elderly patient with a simple uncomplicated case of pneumonia, will receive a much lower Medicare reimbursement than a physician or hospital treating a similar patient in Dade County, Florida. In other words, Midwest providers get penalized for their efficiency, while physicians and hospitals in other regions of the country get rewarded for their uncoordinated and inefficient care.

· An uninsured patient who enters an emergency room with a deep gash to their leg will receive a significantly higher bill for services in the E.R., than a similar patient whose insurance company has negotiated deep discounts with the hospital for their enrollees. In other words, those who can afford it the least get charged the most.

· A 24-year old patient with a serious chronic disease is virtually uninsurable in the health insurance marketplace, when he/she leaves their parent’s family insurance plan upon their 25^th birthday. In other words, health insurance often is unavailable to those who need it the most.

· More than 14,000 Americans lost their health insurance each day during 2009 due to being laid off by their employer. For you see, we are the only industrialized country where if you lose your job, you lose your health insurance.

So when the president was asked about this change in his rhetoric, I wish he would have plainly told the questioner that the reason he now uses the term health insurance reform is because that’s where the problem lies. That we want a health insurance market that doesn’t deny you coverage if you have high blood pressure, diabetes, or other pre-existing conditions. That if you lose your job you sure as heck have enough to worry about; and keeping your health insurance shouldn’t be one of them. For you see, unemployed people get sick too.

Unfortunately, those who try to characterize this as a government takeover of “health care” are just trying to scare you. For you see, the most universal federal health care finance program we have is Medicare, which covers millions and millions of elderly Americans. So if this is the socialistic takeover of health care where are the Medicare-employed doctors and nurses? Where are the Medicare hospitals and clinics? Where is the federal takeover? Well, as we all know, this is all political hyperbole. Medicare beneficiaries get to choose their doctor or change their doctor just like you and me. They use the same private clinics we do; and the same private hospitals we do. Medicare is simply a publicly funded insurance program; nor more … no less.

So let’s dial down the rhetoric and scare tactics and let’s dial up some of our best ideas. Whether we need a “public option” or not is certainly open to an honest debate. But wouldn’t it be great if we ended up with a decent basic health plan that all Americans would have equal access to (let’s call it the Basic American Plan) that all insurance companies would sell for the same price. If insurance companies want competition, well let them compete on quality and service; but not by cherry-picking the healthiest among us, and denying coverage to those who need it the most. Now wouldn’t that be something!

Is it ever really all or nothing?

As a member of the Minnesota Hi-Speed Broadband Task Force I have spent the past few months listening to a variety of public officials and others who have provided comment and testimony regarding broadband deployment throughout the state. And through this process it’s become clear that for a growing number of Minnesotans, ubiquitous access and universal adoption of broadband is a significant goal. But when you really think about it, this notion of universalism increasingly permeates much of our public policy today. Within the current public debate about health care reform, universal coverage is a goal that both Democrats and Republicans publicly seem to embrace; and in our national discussion about public education we want to ensure that absolutely no child is left behind.

It’s interesting that in a capitalist culture that focuses on competition, product differentiation and market share that we seem to be romancing the values of universalism. For example, for many years economists defined the term “full employment” to actually mean an unemployment rate of 5 percent or less. I simply don’t ever recall back in the 1990s seeing public officials at the state or federal level wringing their hands over the 3-5 percent of the work force that were jobless. And public schools with a 90 percent graduation rate used to be a source of pride and held up nationally as an example of what is right with our public school system. Sure, we aspire to100 percent graduation rates, but there just seemed to be an understanding that while no one wants to leave a child behind, that reality often trumps aspiration.

Returning universal adoption, I am reminded that virtually all former innovative technologies still have yet to reach the goal of universal adoption. This is true for even some of our most mundane technologies. For example, we have yet to achieve universal adoption of a telephone in every home, a microwave in every kitchen, or a car in every garage. For the simple reality is that there are a variety of factor that help explain why people choose to adopt some technologies and take a pass on others. Age, income, culture, tradition, religion, education and awareness all come into play.

The late Everett Rogers wrote the seminal book on the adoption and diffusion of innovative technologies. Rogers was an Iowa farm boy who earned his doctorate in the 1950’s trying to understand why some farmers adopted some obviously beneficial technologies while others did not. A decade earlier when agriculture was transitioning from planting varietal seed corn to hybrid seed corn researchers understood that both the yield and the drought-resistant characteristics of the hybrid seed made it far superior. Yet it took many years for farmers to adopt this new technology. From these and other studies, Rogers argued that the adoption of any new technology actually occurs in a series of predictable stages which culminates in an “S-shaped” curve, where the adoption of a new innovation starts out very slowly until it reaches a critical mass; at which point the adoption rate soars, only to tail off and stabilize. Most importantly however, was that Rogers never suggested that any technology will achieve a 100 percent adoption rate. In other words, regardless of the benefits of the innovation there will always be some non-adopters. A good example is the recognition that even today; some parents choose not to immunize their children against a variety of serious and contagious diseases.

So how do we rationally address this increasing attention to universalism in policy when all the evidence suggests that such universalism is unreasonable and unattainable? Well, first we need to recognize that defining anything less than 100 percent as failure makes a fine aspirational goal, but it makes poor public policy. Whether defined as a zero-tolerance drug policy, universal adoption, or no child left behind; policy is always best implemented when it is guided by rational discretion over aspirational ideology.